Economics & Research Blog
Odds and Ends: Don't Get Dr. Joe Started!
By Dr. Joe Webb
Published: April 15, 2008
I'm supposedly off this week, but doing a horrible job of it. I keep watching the news and reading WhatTheyThink. There's always something there to keep me going.
John McCain is touting a gas tax holiday from Memorial Day to Labor Day. Readers of my column and notes know exactly what will happen: gas prices will rise to fill the gap because consumers have already proved they will pay current prices, and they will increase their driving, increasing demand, and raising the price. It's likely that demand would be stronger this summer anyway, as families eschew air travel vacations for more local recreation. If you want to decrease demand, increase the prices. He should be proposing a gas tax increase if that is the goal. We're obviously doing nothing on the supply side, and an odd coalition of environmentalist efforts to stop new oil drilling and oil companies who want to drill more but are unwilling to fight to do so since that might encourage new competitors to come to the market. The oil companies and exporting countries kind of like things just the way they are. There's nothing like using government regulations to build barriers to entry to competition: Adam Smith, the father of capitalism, warned about that.
And why do people keep blaming OPEC when most of our imported oil comes from Canada. Yes, those belligerent Canadians, withholding oil from the market, they're the real enemies. Yeah, right. Well, those Middle East countries must be second, right? Nope. It's Mexico (2007 data). Gosh, it's our neighbors who are really making money off these oil prices. And to think, more than 80% of our oil comes from..... ourselves! Somehow, we never read that anywhere.
Speaking of not reading something somewhere, I am still amazed at how many people think we are importing our country and industries out of existence. Based on the fourth quarter of 2007, US GDP in current dollars was $14 TRILLION dollars. Yeah, but those are imports, right? Nope. Imports are SUBTRACTED from GDP. Somehow, somewhere, people in the USA are doing real work and producing real goods and services that people here and... gasp!.... Canada and Mexico.... and the rest of the world... are actually buying and using.
Does anyone know how big $14 trillion is? It's a million millions! It's a billion thousands! It's huge! And it seems to be happening right under everyone's noses.
A number that gets bandied about a lot is that 70% of GDP is by consumers. No it's not, 100% of GDP is from consumers. Sure, it's what we buy and make, but the rest is government. Where does the government get its money from other than by taxing the work and investments and property of consumers? There's no other place to get it.
Recent inflation data is spooking everybody. Gee, what a surprise. That's what happens when you start printing more money than there are goods and services to support it.
Another funny moment in the railing against imports is that people often forget that those imports include other imported goods! In Japan, where they import more than 95% of their oil, any good that is produced includes energy that was imported from somewhere else. If it's painted, it includes metals, pigments, and other materials that were.... imported from somewhere else! If it doesn't include materials that were imported from somewhere else, it probably includes imported financing, insurance, education, engineering and numerous other services. Yes, they even have to import transportation services. Ever wonder how FedEx and UPS got so big?
A while ago in a 2007, the following was posted:
Bob Smith’s alarm clock (Made in China) went off at 6am and soon his coffee maker (Made in Thailand) was perking, and his toaster (Made in Mexico) was toasting. He shaved with his electric razor (Made in Cambodia). He put on a dress shirt (Made in Sri Lanka), designer jeans (Made in Singapore) and tennis shoes (Made in South Korea). After cooking his breakfast in his new electric hot plate (Made in India) he sat down with his calculator (Made In Thailand) to see how much he could spend for the day. After setting his watch (Made in Taiwan) to the radio (Made in India) he got in his car (Made in Germany) and continued his search for a job. At the end of a discouraging day, Bob decided to take it easy. He put on his slippers (Made in Brazil) poured himself a glass of wine (Made in France) and turned on his TV (Made in Japan), and then wondered why he could not find a good paying job in the United States.
I wrote the following back, and am pleased to publish it here:
Bob Smith’s alarm clock (Made in China; invented in 15th Century Germany) went off at 6am and soon his coffee maker (Made in Thailand; invented in France, by an American) was perking, and his toaster (Made in Mexico, invented in USA) was toasting. He shaved with his electric razor (Made in Cambodia, invented in USA). He put on a dress shirt (Made in Sri Lanka, many invented in Britain, Sri Lanka was a former colony), designer jeans (Made in Singapore, invented in U.S.) and tennis shoes (Made in South Korea, invented in Germany). After cooking his breakfast in his new electric hot plate (Made in India, invented in Britain, yet another Brit colony) he sat down with his calculator (Made In Thailand, invented in France) to see how much he could spend for the day. After setting his watch (Made in Taiwan, invented in Germany) to the radio (Made in India, invented in Italy) he got in his car (Made in Germany, and invented there, too) and continued his search for a job. At the end of a discouraging day, Bob decided to take it easy. He put on his slippers (Made in Brazil, invented in Japan and India) poured himself a glass of wine (Made in France, invented in Persia) and turned on his TV (Made in Japan, Italy), and then wondered why he could not find a good paying job in the United States (if only something would be invented here, or those Europeans would have stopped colonizing sooner, perhaps he would. Almost everything Bob Smith uses is based on stolen ideas!).
Then I figured that wasn't enough. What was my day like?
When I woke up this morning and I said a quick prayer (Middle East, Italy). I wandered to the bathroom to use the toilet and sink (Italy, Egypt, others). I sat down and read (Britain) the paper (Greece, Egypt). I said good morning to Mrs Webb (Austrian engineering, built in the USA). I had a cup of tea (England, China) and a biscotti (Italy). I thought about having spaghetti for lunch (China). Maybe I'll be good and have some yogurt (Balkans). I'm really sore after karate class last night (China, Japan, India), I thought (France, some guy named DesCartes). So I took an aspirin (Germany), in fact two (India, Arabia) of them. I'm glad the milk in my tea is fresh and unspoiled (France). I felt guilty (Austria, Germany, Italy, Middle East) about violating my low carb diet (Netherlands).
Nothing comes from any one place exclusively. Everything comes from everywhere. As long as we communicate across the miles and time itself, ideas will emerge, be combined, and created, and they will be used in ways unknown to us today or in generations to come. Where has our sense of wonder gone?